Home > Uncategorized > Outsourcing Failing in Britain… a Harbinger of What Will Happen Here… or a Mirror of What IS Happening Here

Outsourcing Failing in Britain… a Harbinger of What Will Happen Here… or a Mirror of What IS Happening Here

February 1, 2018

The NYTimes reported in an article published in today’s paper that the privatization of public services is failing in Britain. “Britain was a Pioneer in Outsourcing Services. Now the Model is ‘Broken'” by Kimiko de Freitas-Tamura describes how the austerity program implemented by the British government combined with outsourcing— or more accurately privatization— has undercut the efficient delivery of services. While outsourcing is sold to the public as a means of achieving efficiency, it has not played out that way in Britain:

A report by the government’s National Audit Office shows that taxpayers are expected to pay nearly $285 billion to private contractors for projects and services over the next 25 years. The agency also found that with changing economics, schools could cost 40 percent more, and hospitals 70 percent more, when undertaken through private-finance initiatives rather than though the government.

Here’s the problem with subjecting the delivery of necessary services to “market forces”. In the marketplace, if a corporation cannot make a profit it closes it’s doors or opts out of providing a particular product. My brother’s experience at DuPont is a case in point. DuPont determined that is was unable to sell x-ray film at a substantial profit so it decided to sell of that branch of its operations to another corporation. But private companies who offer necessary public services cannot close as easily. When a private company is faced with declining revenues because the government needs to cut its budget and they decide to go out of that business or are forced to go out of business altogether, it’s not only the shareholders who lose out, those who expect to receive services lose out as well. Here’s how the privatization is playing out in Britain:

“The British government allowed itself to offer a Swedish-style public sector while only being able to raise an American level of taxes, putting massive permanent pressure on the government,” said Tony Travers, a professor of government at the London School of Economics.

Governments have become good enough at driving down the prices of contracts, he added, that companies struggle to make a profit. Carillion (the British government’s biggest outsourcing contractor) collapsed in part because it had underbid for contracts that became unsustainable when it ran into delays and cost overruns.

How does this relate to our country’s economy? Well… we just passed a massive tax cut that is certain to starve the government of revenue in the near future and our country’s government, not Britain’s, has the highest level of outsourcing. So it isn’t hard to envision a scenario where revenues for outsourced services diminish to the level where shareholders withdraw their support and the businesses collapse.

Kimiko de Freitas-Tamura’s article focussed on how the collapse of privatized care for the elderly impacted thousands of ill and disabled senior citizens, but it isn’t too hard to see how the same scenario could play out if for-profit charter schools suddenly found themselves unable to satisfy investors and decided to close. Where would their students go if that happened? They would have to return to underfunded and increasingly dilapidated and overcrowded public schools.

Britain’s experience illustrates what happens when low taxes and profits are more important than the well being of a nation’s citizens. But is Britain’s experience a harbinger for the US… or is it a mirror?

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